The property allowance means the first £1,000 of rental income each tax year is tax-free and does not need to be reported. If your rent before expenses is more than £1,000 you must normally register for Self Assessment and file a return, even if your allowable expenses or your personal allowance mean no tax is actually due. HMRC separates two questions: whether you have to file, which turns on the £1,000 figure, and how much you pay, which turns on your total income and allowances.
The two thresholds people confuse
- £1,000 property allowance. Decides whether you need to report the income at all. Applies to gross rent, before any expenses.
- Personal allowance. Decides how much tax you pay on your total income from all sources. Having income below it does not remove the duty to file if rent is over £1,000.
Above £1,000: your choices
You can claim the £1,000 allowance instead of your expenses, which is simpler if your costs are small, or deduct your actual expenses, which is better if they are larger than £1,000. You cannot do both. If your expenses exceed your rent, claim them: the loss carries forward against future rental profits.
Registering and deadlines
Tell HMRC by 5 October after the end of the tax year in which the rent started. Returns are due by 31 January online. Missing registration does not usually attract a penalty on its own if no tax was due, but late returns do, so register as soon as the income crosses £1,000.
Making Tax Digital
From April 2026, landlords with total self-employment and property income above £50,000 keep digital records and send quarterly updates to HMRC; the threshold falls to £30,000 in April 2027 and £20,000 in April 2028. The threshold is your gross property and self-employment income (before expenses), not your profit. Landlords whose qualifying income stays at or below £20,000 are not brought in at all. Small rental income is therefore unaffected for now, though the thresholds fall over time, so it is worth knowing the direction of travel.
Common questions
I get £900 a year from a parking space. Do I need to declare it?
No. Income from land or property up to £1,000 a year is covered by the property allowance and does not need to be reported.
My rent is £6,000 but my costs are £6,500. Do I file?
Yes, because the rent is over £1,000. You would declare a loss of £500, which carries forward and reduces tax on future rental profits.
I am retired with income below the personal allowance and £4,000 of rent. Do I file?
Yes. The rent is over £1,000 so a return is needed. You may well pay no tax once the personal allowance is applied, but the return is still required.
Does the £1,000 allowance apply to a lodger?
You cannot use both Rent a Room relief and the property allowance on the same income. For a lodger in your own home, Rent a Room (£7,500) is normally the better relief.
This page is general information for UK landlords, not advice on your own position. Figures and rules are correct at the review date above and are re-checked after each Budget.